Whether it’s a stock, a house or a business, we all want to sell at the perfect time. Selling a manufacturing company is not different than other major transactions in that you want to sell when your business is up. For manufacturing business owners, however, it’s not just about selling when sales are up. There is so much more to consider.
Selling When Sales Are In An Upward Trajectory Is Important, But Other Factors May Be Equally Important.
Ability To Transition:
Unlike other businesses, the transition of manufacturing companies, depending on how complicated the manufacturing process is, can be much longer than other types of business. This is especially true in the current market, when buyers are coming out of corporate America in droves to make acquisition, rather than from the manufacturing community. If you develop a health issue that diminishes your ability to transition the company, your realized sale price will be diminished. Additionally if your staff is aging and you’ve made no effort to train the next generation of worker, buyers will see danger, and thus pay less.
Cyclicality of Sectors:
This will affect some manufacturing sectors more than others, but Sellers need to be aware of sector cycles. For example, business owners serving the oil and gas industries would have achieved more prior to prices tanking. Likewise, capital equipment manufacturers may be negatively impacted by rising interest rates, which alter how much equipment buyers can afford.
Industry Disruptive Technology On The Horizon:
Businesses that manufactured components for postage equipment were likely dramatically impacted by the rise of services like Stamps.com, and online bill pay in the last decade. Likewise today, the rise of 3D printing and other automation advances may have an impact on certain sectors. The point here is to pay attention to new technologies that could impact your business and plan accordingly.
It’s Hard To Quit While You’re Ahead:
Years ago I sold a business after the death of the founder. After being diagnosed with advanced stage lung cancer, there was not enough time to transition the business before his passing. We were able to help his widow, but the realized number was diminished. It’s hard for manufacturing entrepreneurs to exit when everything is going right. Sometimes having a liquidity event to guarantee your financial future is the smartest thing you can do. Most business acquirers welcome a Seller remaining involved for a few years. You can remain vital and active while still securing your financial future. The best time to sell a manufacturing company is when you’re up!